You can prepare for retirement, your kid's college, a new home, or any number of things. Even if you have a limited income, you can save and prosper if you commit and stick with it.
You can start with any level of income. If you're working a part time job, identify your average weekly income and set a percentage. 10% is the recommended average. You can go for more or less. Your circumstances will dictate your amount. Even if you go to 1%, you are developing the habit. Save something. Put it into perspective. Give up a cup of coffee a day and save a few cents. Walk one day instead of drive and save a gallon of gas. You can find some amount to save. I once did an experiment by picking up every penny I found lying discarded at various places and putting them in an old coffee can. At the end of the year, I had over $7 in pennies. I gave up cigarettes and now save between $4 and $8 a day (I was a 1-2 pack a day smoker). A savings is there, only you can identify it.
Now that you have a dime, or a buck, or two, find a place to put it where you can not only save it but make a profit on the savings. You can open a Credit Union account for as little as $5. If you get paid by check in hand, never ever cash it at a check cashing stand. Establish an account and cash it for free. When you cash the check, put your planned percentage in a savings account. If you think you need the whole check, put the excess of a rounded amount into the account. For example, if you were paid $57.60, put $7.60 away. Too much? Put $2.60 away. Too much? Put $.60 away. Get the picture? Pick an amount, put it away.
If your job offers a 401 (k) or any other savings plan, take advantage of it and contribute at least the absolute minimum. The company gets a tax break by matching your contribution and you get a tremendous break by contributing and having it doubled at no extra cost. If you can, max it out. Keoghs are the most lucrative investment plans in the market, use at least the absolute minimum potential it offers. The younger you are, the better.
Observe the "rule of 72". Find an investment and identify the percentage of return on your money invested. Divide the interest into 72. The dividend is the number of years it will take your money to double. For example, you find an investment that will pay 10% on a $100 investment; divide 72 by 10. 10 into 72 equals 7.2. In 7.2 years, your $100 investment will double. This formula applies to any quantity of investment and percent return.
Identify an investment and make a regular investment, the same amount at the same time every month. This is called "Dollar cost averaging". This is usually used on mutual funds but there are other applications. The proven theory is, some months you will buy at a low price, other months you will buy a little higher. Over time, the average will be a price at your advantage. Stick with it and don't waver. You must be consistent and stay committed. I cannot guarantee any results, you have to stay engaged and watch your investments, but theoretically, this is a proven and widely practiced investment strategy.
Avoid brokers that charge a fee for investing your money. There are many mutual fund programs out there that allow you to invest directly with no commission called "no load" funds. You can find them on the internet and a good resource to study them is "Weisenberger's", a financial periodical you can look at for free at your local public library. My story briefly; I bought my first mutual fund by contacting 20th Century (now American Century) which I found by reviewing Weisenberger's at the library. That was many years ago and the numbers have changed, but I started with $25/month and a simple, low cost investment is now worth tens of thousands of dollars. I'm not pushing a product, I'm making a point. Many companies want your business and you can invest with them without paying a broker. Go on line and just start contacting them. I didn't have the internet years ago. If I had, WOW, I can only guess at what I may have done.
Once you've started and get an account started, spread the investments around and avoid putting all your eggs in one basket. If one goes down, another will probably go up. If you can get into mutual funds, do it. They are relatively safe, are professionally managed, and cost you little. They make money if you make money and they have to spread your investment around to several different funds so it is difficult to lose everything in a market hiccup. Even in today's market, there is money to be made. Some stocks are down, some are up. But even the ones that are down are generally going to go back up. I am not a professional investor. I only invest for myself. But I've been learning for over 25 years and only encourage you to take an interest and get started. If you only make 2% on a $10 investment next month, it's $.20 more than you started with.
Just get goin'.
- Don't fall for "get rich quick" schemes. Only the guy making the offer gets rich.
- Watch the pennies and the Dollars will take care of themselves.
- If you don't have a lot to invest, invest a little.
- Credit Unions are generally very consumer oriented and safe.
- Go for the long haul, not the quick buck.
- Benefit from Compound Interest.
- Your money works for you best when you leave it alone.
- I am not an investment counselor. My advice comes from my personal experience.
- Never invest in unsolicited proposals.
- Find investment possibilities on the net, then contact thru snail mail. It will verify legitimacy.
- If it's too good to be true, it is.
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